Neural Pocket Inc., is a company that develops businesses in smart cities, signage advertising, and demand forecasting for fashion industry based on image recognition AI. Tomohiro Somehara, who joined the company in 2018 and is currently the CFO, had been a Venture Partner at UTEC for a period of time. Why did Mr. Somehara, who originally worked as a CPA, enter into the world of startups? We asked him to talk about the function of Venture Partners as he has both supported companies as a venture partner and received Venture Partner support as a member of a startup.
SECTION 1 From CPA to the World of Startups
Mr. Somehara became a certified public accountant while still studying at Hitotsubashi University. We asked him how he got involved in startups as a freelancer, going off the typical career path of accountants.
- Mr. Somehara, would you tell me about your background?
I was originally a CPA. I am from Hokkaido, and when I entered university in 1997, Takugin (Hokkaido Takushoku Bank) went bankrupt. I thought that even if I graduate and get a job somewhere, I don't know what would happen to me in the future. That’s why I got my certification. My father was a labor and social security attorney and I had been familiar with certified professional career and that could have influenced my decision.
After I became certified, I worked as an instructor at a prep school for CPA examination then worked at an auditing firm for three years. I then felt that since I got the certification as CPA, I wanted to experience the practice of auditing, and gain a wide range of experience within a short period of time, so I then decided to join a medium-sized auditing firm. There were many things I discovered in my experience during these times, but I still wanted to look further out into the world, so I decided to take a different path once again after three years.
Next, I worked for a major securities firm as an M&A advisor. Here I wish I had some contact with startups during this time, but I worked there from 2006 to 2012. That was when startups were losing momentum due to the 'Livedoor Shock', so there were not many startup-related projects assigned to me.
- How did you become interested in startups?
I became interested in startups after I started to be independent as a CPA. The securities firm also gave me a variety of experience, but I didn't really plan on staying with a large organization for a long time. So I left the company and started as a freelancer to perform due diligence on venture capital projects.
The turning point for me came in a project for a major financial company. When I started my own accounting firm in 2012, venture finance was gradually beginning to take off. It just so happened that a friend of mine was working for a major financial company that was also getting into the CVC business, and so I helped them out.
Specifically, I went to interview startups in their early stage and review their business plans. When I worked at audit firm and securities firm, I was used to seeing companies that were already mature and sluggish. On the other hand, in my support for the CVC company we were dealing with dynamic, growing companies. Through working closely with these rapidly growing companies, I remember simply thinking, "startups are so interesting."
SECTION 2 Becoming a Venture Partner, Utilizing My Experience with Startups
As Mr.Somehara became involved in the CVC business, his interest in startups grew, and he decided to dive into the world of startups. From there, the connection with UTEC began.
- How did you become a Venture Partner at UTEC?
As I worked on various projects as a freelancer, my interest in startups grew, and in 2015, I joined Nowcast, Inc., a startup from the University of Tokyo. It wasn't a full commitment, but I was the first employee and I did everything from setting up the office to taking care of the financing of the company. Eventually, I became the CFO and also ended up being involved in management. UTEC were investors in Nowcast. Through this connection, I got to know Mr. Tomotaka Goji, the president of UTEC, and Mr. Noriaki Sakamoto, board member and partner.
In 2016, Nowcast was merged into another company, and I left my position at that time. To be honest, right before I left, the workload was so intense that I thought, "I've had enough of startups.” But once I got away and out, I again felt I wanted to go back into the world of startups and dedicate it my all. Maybe I'm a little masochistic (laughs).
Also did other work as a freelancer while I was at Nowcast. But this time, I want to make a full commitment and put everything I have into the startup. As my will grew, I started looking for a startup that would employ me. During this process, I approached Mr. Sakamoto of UTEC and asked him if he knew of any interesting startup among his portfolio companies, then he made me an offer to become a Venture Partner.
That offer came in the fall of 2017. UTEC was planning to set up its fourth fund in January of the following year, so they were looking to hire Venture Partners. For me, this offer to become Venture Partner was a totally unexpected proposal, but I decided to accept it because I thought I would enjoy working for UTEC as I would get to provide hands-on support to its portfolio companies
- What type of projects were you involved in UTEC?
As a Venture Partner, I helped five different companies. All of the companies I worked with were interesting and full of exciting projects.
I had two main roles. First was to assist in setting up the back office, which would be the foundation of the company. Most of UTEC's portfolio companies are in the seed or early stage, and so their back-office departments such as finance and admin are not yet in place. This is where I would add value by setting these back-office departments up, including the hiring of employees.
I had a similar experience at Nowcast. But each president of the portfolio company takes setting up the back office differently. Some presidents want to spend their resources onto R&D rather than administration, while others want to prepare for an IPO as soon as possible. While taking their ideas into account, I tried to support them while anticipating future risks and preventing them from fatal failures.
This wasn't particularly a flamboyant role, but it was rewarding. After setting up the back-office department for a startup, I was once asked to join them. I was glad to know that they had trust in me.
The other role I perform is the support of fundraising. This directly affects the startup’s business and therefore it is implies lot of responsibility. Fundraising has some uncertainty as there is a counterparty, and things don't always go as planned. However, it is an exceptionally rewarding experience once we are able to put a deal together.
SECTION 3 Back to the Startup
In 2018, Mr. Somehara leaves Venture Partner at UTEC to becoming the CFO of Neural Pocket, Inc., an AI-related startup. How does the experience of externally supporting a startup come into play once you are employed in one?
- Can you tell me why you joined another startup again?
Neural Pocket is a startup with advanced image recognition technology. UTEC made a Series A investment in August 2018, and Mr. Sakamoto introduced them to me then. Neural Pocket was looking for someone who could be a full-time CFO, and I had wanted to fully commit to a startup. In that sense, we were a mutual match.
The decision factor for me was the people. The technology is great because Neural Pocket have a group of excellent engineers, and the management has abundant experience in the business side, their technology and business are well integrated as a company. That was the reason the company had a competitive edge, but for me, the most important thing was that I had a good chemistrywith the management team.
- Has your experience as Venture Partner at UTEC helped you in your current position?
Yes. Being involved in other startups as a Venture Partner and having accumulated knowledge about practices of other companies has gave me a wealth of experience. When I encounter a problem now, I could refer to my previous experiences and say "This is how this was solved in that company."
Another advantage is that I could see my own company from the perspective of a venture capitalist. In a strict sense, a Venture Partner is not a capitalist. However, I was able to communicate very closely with the capitalists while I was working as a member of UTEC, I naturally acquired the perspective of an investor. As a CFO, I now have many opportunities to communicated with investors, and knowing how they look at things helps me to build a trusting relationship with them.
I was a Venture Partner for less than a year, so wasn’t such a long time. But my experience at UTEC has definitely helped me in my current work. Growing Neural Pocket is one of my ways to give back to UTEC. I will continue to work hard to make the company one that people feel driven to invest in.